lovelock ppt chapter 04

Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 4 - 1

Chapter 4: Distributing Services Through Physical and Electronic Channels


Overview of Chapter 4

Distribution in a Services Context

Determining Type of Contact: Options for Service Delivery

Place and Time Decisions

Delivering Services in Cyberspace

The Role of Intermediaries

The Challenge of Distribution in Large Domestic Markets

Distributing Services Internationally


Applying the Flow Model of Distribution to Services

Distribution embraces three interrelated elements:

Information and promotion flow

To get customer interested in buying the service

Negotiation flow

To sell the right to use a service

Product flow

To develop a network of local sites


Distinguishing between Distribution of Supplementary and Core Services

Distribution relates to both core services and supplementary services

Core services for people processing and possession processing services require physical locations

Core services for mental stimulus processing and information processing can be distributed electronically

Supplementary services can be tangible or intangible in nature; latter can be distributed widely and cost-effectively via nonphysical channels Telephone Internet


Information and Physical Processes of Augmented Service Product (Fig 4.1)

Exceptions

Billing

Payment

Informationprocesses

InformationConsultation

Safekeeping

Physical processe

s

Order-takingCore

Hospitality


Using Websites for Service Delivery

SafekeepingTrack package movements

Check repair status

Core: Use Web to deliver information-based core services

Core

ConsultationConduct e-mail dialogUse expert systems

Order-takingMake/confirm reservationsSubmit applicationsOrder goods, check status

HospitalityRecord preferences

BillingReceive bill

Make auction bidCheck account status

ExceptionsMake special requests

Resolve problems

PaymentPay by bank card

Direct debit

InformationRead brochure/FAQ; get schedules/

directions; check prices


Distribution Options for Serving Customers

Customers visit service site

Convenience of service factory locations and operational schedules important when customer has to be physically present

Service providers go to customers

Unavoidable when object of service is immovable More expensive and time-consuming for service provider

Service transaction is conducted remotely

Achieved with help of logistics and telecommunications


Six Options for Service Delivery(Table 4.1)

Customer goes to service organization

Service organization comes to customer

Customer and service organization transact remotely (mail or electronic communications)

Theater

Barbershop

Bus service

Fast-food chain

House painting

Mobile car wash

Credit card company

Local TV station

Mail delivery

Broadcast network

Telephone company

Type of Interaction between Customer and Service Organization

Single Site Multiple Sites

Availability of Service Outlets


Channel Preferences Vary among Customers

For complex and high-perceived risk services, people tend to rely on personal channels

Individuals with greater confidence and knowledge about a service/channel tend to use impersonal and self-service channels

Customers with social motives tend to use personal channels

Convenience is a key driver of channel choice


Places of Service Delivery

Cost, productivity, and access to labor are key determinants to locating a service facility

Locational constraints

Operational requirements- Airports

Geographic factors- Ski resorts

Need for economies of scale- Hospitals


Places of Service Delivery

Ministores

Creating many small service factories to maximize geographic coverage- Automated kiosks

Separating front and back stages of operation- Taco Bell

Locating in multipurpose facilities

Proximity to where customers live or work- Service stations- Service Perspectives 4.2


Time of Service Delivery

Traditionally, schedules were restricted Service availability limited to daytime, 40 to 50 hours a week Sunday historically considered as a rest day in Christian

tradition, Saturday in Jewish tradition, and Friday in Muslim tradition

Today For flexible, responsive service operations:

- 24/7 service—24 hours a day, 7 days a week, around the world

(Service Perspectives 4.3)

Some organizations still avoid 7-day operations, for example:

- Atlanta-based Chick-fil-A “Being closed on Sunday is part of our value proposition”


Service Delivery Innovations Facilitated by Technology

Technological Innovations Development of “smart” mobile telephones and PDAs as well

as Wi-Fi high-speed Internet technology that links users to Internet from almost anywhere

Voice-recognition technology Websites Smart cards

- Store detailed information about customer- Act as electronic purse containing digital money

Increase accessibility of services

Deliver right information or interaction at right time

Create and maintain up-to-date real-time information


e-Commerce: Move to Cyberspace (1)

Internet facilitates 5 categories of “flow” Information Negotiation Service Transactions Promotion

Electronic channels offer complement/alternative to traditional physical channels

Convenience (24-hour availability, save time, effort)

Ease of obtaining information online and searching for desired items

Better prices than in many bricks-and-mortar stores

Broad selection


e-Commerce: Move to Cyberspace (2)

Recent Developments link Websites, customer management (CRM) systems, and mobile telephony

Integrating mobile devices into the service delivery infrastructure can be used as means to:

Access services Alert customers to opportunities/problems Update information in real time

See “Online versus Bricks-and-Mortar” (SP 4.4)


Splitting Responsibilities For Supplementary Service Elements (Fig 4.3)

Challenges for original supplier Act as guardian of overall process Ensure that each element offered by intermediaries fits overall service concept

As created by originating firm

As enhanced by distributor

As experienced by customer

+Core = Core

Core product Supplementary services

Total experience and benefits


Franchising (1)

Popular way to expand delivery of effective service concept

Franchising is a fast growth strategy, when

Resources are limited Long-term commitment of store managers is crucial Local knowledge is important Fast growth is necessary to preempt competition

Study shows significant attrition rate among franchisors in the early years of a new franchise system One-third of all systems fail within first 4 years Three-fourths of all franchisors cease to exist after 12 years


Franchising (2)

Disadvantages of franchising

Some loss of control over delivery system and, thereby, over how customers experience actual service

Effective quality control is important yet difficult Conflict between franchisees may arise especially as they

gain experience

Alternative: license another supplier to act on the original supplier’s behalf to deliver core product, for example:

Trucking companies Banks selling insurance products


Dunkin’ Brands Distributes Its Branded Service Concepts through Franchisees (Fig 4.4)

Dunkin’ brands: Dunkin’ Donuts (coffee and backed goods), Baskin Robbins (ice cream), Togo’s (sandwiches)


The Challenge of Distribution In Large Domestic Markets

Marketing services (i.e., physical logistics) face challenges due to:

Distances involved (geographic areas) Existence of multiple time zones Multiculturalism (especially, immigrants and indigenous

people) Differences in laws and tax rates

Large U.S. companies counter this by:

Targeting specific market segments Seeking out narrow market niches

Serving multiple segments across a huge geographic area is biggest marketing challenge


How Service Processes Affect International Market Entry (1)

People processing services require direct contact with customers Export service concept

- Acting alone or in partnership with local suppliers

- For example, e.g., chain restaurants, hotels, car rental firms

Import customers

- Inviting customers from overseas to firm’s home country

- For example, hospitals catering to “medical tourism”

Transport customers to new locations- Passenger transportation (air, sea, rail, road)


How Service Processes Affect International Market Entry (2)

Possession processing involves services to customer’s physical possessions

- For example, repair and maintenance, freight transport

Information-based services include mental processing services and information processing services

Export the service to a local service factory- Hollywood film shown around the world

Import customers Export the information via telecommunications and

transform it locally- Data can be downloaded via CDs or DVDs


Factors Favoring Adoption of Transnational Strategies

Competition drivers Competitors from overseas; interdependence of countries Firms may be obliged to follow competitors into new

markets to protect own positions elsewhere

Technology drivers Advances in information

technology—miniaturization/mobility of equipment, digitization of voice

Cost drivers Economies of scale Lower operating costs

Government drivers Favorable trade policies, compatible technical standards,

common marketing regulations


Modes of Internationalization

Export information-based services Transmit via electronic channels Store in physical media, ship as merchandise

Use third parties to market/deliver service concept Licensing agents Brokers Franchising Alliance partners Minority joint ventures

Control service enterprise abroad

Direct investment in new business Buyout of existing business

lovelock ppt chapter 04

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